State Accounting and Budgetary Procedures

(a) The Chief Fiscal Officer of the State shall prescribe the method of handling refunds and reimbursements to the state for moneys previously paid out or due the state. If no properly classified appropriation account exists on the books of the Chief Fiscal Officer of the State and Auditor of State for which the respective refund is applicable, the Chief Fiscal Officer of the State is authorized to establish such appropriation account on the books of the Chief Fiscal Officer of the State, Auditor of State, and the various fiscal officers. (b) No such refunds shall cause a transfer of appropriation on the books of the Chief Fiscal Officer of the State, Auditor of State, and the various fiscal officers except for:

(1) Proceeds received from insurance policies for casualty losses by state agencies;

(2) Proceeds received from vendors on account of overpayment of obligations remitted by state agencies;

(3) Refunds to state agencies for cash advances or over-allocations made to state and local agencies for subgrants;

(4) Refunds to state agencies for the erroneous payment or overpayment of salaries to state employees;

(5) Proceeds derived from the maturity or redemption of investments;

(6) Reimbursements to institutions of higher learning for cash fund expenditures for salaries that are properly chargeable to funds in the State Treasury;

(7) Federal reimbursements of expenses paid in advance by the state on behalf of the federal government; and

(8) Reimbursements by vendors or their agents for warranties, product rebates, and service adjustments.

R1-19-4-1801 Reimbursement of Expenses between Agencies (Also see R1-19-6-701)

Generally Accepted Accounting Principles (GAAP) defines interfund reimbursements as "repayments from the funds responsible for particular expenditures or expense to the funds that initially paid for them." Per GAAP, interfund reimbursements should be treated as an increase in expenditures or expenses in the reimbursing fund and a decrease in expenditures in the reimbursed fund. Allocation of indirect cost (overhead) should also be classified as reimbursements. There are two methods available that comply with GAAP with one method restoring appropriation if a current year refund and the second method not restoring appropriation but reclassifying the transaction for financial reporting purposes. Refer to the Frequently Asked Questions Section for detailed examples of the two methods. Refunds to expenditures are permitted by law only in certain instances including reimbursements to state agencies for cost-sharing purposes.

GAAP also states that, when governments concentrate one or more risk financing activities in a single fund, premiums received from other funds should be treated as an interfund reimbursement. An exception to this rule is, when the premiums paid are in excess of related expenditures, these excess premiums should be treated as an interfund transfer. The current practice is for agencies to record expense and the risk financing activity to record revenue. Agencies should continue this practice. These payments will be evaluated and adjusted accordingly by the DFA-OA-CAFR Section.

The procedure used when one agency incurs expenses that is pursuant to a cost sharing arrangement entered into prior to the expense occurring between two agencies or an agency incorrectly paid another agency’s invoice is a hybrid refund to expenditure transaction which is processed on a journal entry by the DFA-OA-Reconciliation Section. The purpose of the

refund to expenditure transaction is to reduce expense and restore the appropriation used on the books of the agency that paid the expense and record the expense and reduce the appropriation on the other agency’s books. Only a current year refund to expenditure gives the agency back their funding and appropriation to use again during the current fiscal year. Prior year refunds do not restore appropriation or funding unless the appropriation and funds have carry-forward authorization in the appropriation Act. The journal entry processed for hybrid refund to expenditures is outlined in the Frequently Asked Question Section.

Hybrid refunds to expenditure cannot be used to circumvent the appropriation process.

PLEASE NOTE: See reimbursement between agencies process in appendix P1-19-4-1503.

(a) Petty cash imprest funds for any state agency shall be approved by the Chief Fiscal Officer of the State only in the case of actual need for such funds in connection with the daily operations of the agency and shall be subject to such limitations with respect to amount and use of the funds as shall be prescribed by him or her. (b) The petty cash imprest funds shall not be used to circumvent purchasing regulations, nor for the purpose of reimbursing individuals for travel expenses.

All fines, fees, penalties, court costs, taxes, and other collections which, by the laws of this state, are to be remitted directly to the Treasurer of State for credit in the State Treasury to an account of an agency of this state shall be remitted directly to the agency to whose account they are to be credited. Upon receipt, the agency shall transmit them to the Treasurer of State who shall credit them in the State Treasury to the account of the agency.

History. Acts 1961, No. 250, § 1; A.S.A. 1947, § 13-505.1

19-4-1804. Geological publications income.

Charges, income, receipts, or revenue derived from the sale of publications by the Arkansas Geological Survey shall be deposited in the State Treasury as a refund to expenditures.

History. Acts 1971, No. 585, § 19; A.S.A. 1947, § 13-549.

19-4-1805. Deposits for highway employees retirement.

All moneys received in the State Treasury for deposit in the State Highway Employees’ Retirement System Fund that are derived from the sale or redemption of stocks, bonds, or other securities, other than interest, are to be classified and handled on the books of the Treasurer of State, Auditor of State, and the Department of Finance and Administration as a refund to expenditures.

History. Acts 1975, No. 72, § 4.

19-4-1806. Grants, aids, and donations.

All state agencies are authorized to accept grants, aids, and donations and to enter into contracts to accept grants, aids, and donations. Following procedures prescribed by the Chief Fiscal Officer of the State, funds received from grants, aids, and donations may be deposited, disbursed, budgeted, and regulated.

History. Acts 1973, No. 876, § 19; A.S.A. 1947, § 13-345.

19-4-1807. Federal funds generally.

(a) In the event the Congress of the United States shall appropriate funds for the benefit of the state or any state agency or in the event any federal funds shall be paid to the state or any agency thereof for the purpose of reimbursing the state for funds previously paid out, and in the event any such federal funds are deposited in the State Treasury and there is no law providing for the depositing of such moneys in a state fund or appropriating them from a state fund, taking into consideration the provisions and requirements of the miscellaneous federal grant appropriation, then the Chief Fiscal Officer of the State shall have the authority to direct the State Treasury to establish funds, fund accounts, or accounts on the books of the various fiscal officers of the state for the purpose of handling and disbursing these federal funds. (b) Any such federal funds shall be handled only in accordance with the purpose for which the funds were granted to, or paid over to, the state or any agency thereof. All such federal funds shall be subject to the procedures prescribed by the Chief Fiscal Officer of the State for the disbursement of funds.

History. Acts 1973, No. 876, § 24; A.S.A. 1947, § 13-350.

R1-19-4-1807 Cash Management Improvement Act

Purpose of the Cash Management Improvement Act

The purpose of the Cash Management Improvement Act is to ensure efficiency, effectiveness and equity in the exchange of funds between the States and the federal government for federal assistance programs. The Cash Management Improvement Act of 1990 (CMIA) was enacted by Public Law 101-453, as amended by the Cash Management Improvement Act of 1992 (Public Law 102-589), codified in the United State Code (USC) at 31 U.S.C. 6501 and 31U.S.C. 6503. The implementing regulations are found in the Code of Federal Regulations (CFR) at 31 CFR Part 205. The general provisions of the Act are as follows:

1. Federal agencies must make timely fund transfers and grant awards to state agencies.

2. State agencies must minimize the time period between the deposit of federal funds in the State’s account and the disbursement of funds for program purposes.

3. With some exceptions, the State is entitled to interest from the federal government from the time the State’s warrants are redeemed until federal funds are deposited in the State’s account.

4. The federal government is entitled to interest from the State from the time federal funds are deposited in the State’s account until the state warrants are redeemed.

5. The State must enter into a Treasury-State Agreement (TSA) with the U.S. Department of the Treasury, Financial Management Service (FMS), to set forth terms and conditions for implementing CMIA. On October 12, 2000, the FMS issued a Notice of Proposed Rulemaking (NPR) proposing revisions to the regulations implementing the Cash Management Improvement Act of 1990, as amended. The Final Rule finalizes the proposed rule with changes that updates the current regulations and, through comments received in response to the NPR, addresses various concerns raised since the initial issuance of the regulations.

The Treasury-State Agreement defines the drawdown methods to be used by agencies.

The Department of Finance and Administration-Office of Accounting (DFA-OA) with the assistance of all affected state agencies negotiates the TSA with FMS. The TSA outlines by program, the funding techniques and the forecast describing the amount of funds subtracted from a state’s bank account on a daily basis after a state makes a disbursement. The forecast used by the state to draw down funds from the federal government is referred as a clearance pattern. Generally, conformance with the TSA assures that the State does not owe the federal government, or is not due from the federal government, interest liability on its draw downs. The State or the federal government may propose amendments to the TSA at any time during the duration of the contract. A copy of the TSA agreement may be obtained from the DFA -Office of Accounting-Reconciliation Section or printed from P1-19-4-1807.

Federal Assistance Programs and State Agencies Subject to the CMIA

The programs listed in the Catalog of Federal Domestic Assistance are subject to CMIA regulations. Currently, programs with $39 million or more in annual federal expenditures are required to be subject to the TSA (CMIA agreement). The threshold dollar amount that determines if a Federal program is required to be included in the TSA is calculated annually using a formula furnished by FMS. The list of federal assistance programs impacted by CMIA is revised annually as federal expenditures increase or decrease from the threshold. The $39 million threshold was established consistent with the Cash Management Improvement Act Guide to CMIA Thresholds under the Final Rule and was utilized in the preparation of the FY2011 TSA. State agencies that administer CMIA programs are subject to CMIA regulations.

Responsibilities of the DFA-Office of Accounting

The responsibilities of DFA-OA are to:

1. Annually identify the state agencies and federal assistance programs that will be considered as CMIA programs and notify affected state agencies.

2. Negotiate with FMS new agreements and amendments to the existing TSA.

3. With the assistance of the Treasurer of State and affected state agencies, develop warrant clearance and redemption patterns.

4. Prepare annual interest reports for submittal to FMS (submitted in December each year for the previous state fiscal year).

5. Direct state agencies as to the payment of state interest liability and/or receipt of federal interest liability.

6. Certify, with affected agencies' concurrence, every five years that clearance patterns correspond to a program's clearance activities.

Responsibilities of Agencies Administering CMIA-Covered Programs

The responsibilities of the state agencies that administer CMIA programs are:

Request federal funds in accordance with the approved funding technique described in the TSA and in amounts needed for immediate payments.

Document the amount of federal funds requested and when federal funds are deposited in the State’s account. If federal funds are not available when required per the TSA, process the request which will document federal funds were properly requested by the State in accordance with the TSA.

For the federal draw systems that reject requests when federal funds are not available in the system, make the request and print the rejection notice as evidence of the State’s conformance with the TSA. If necessary, make appropriate phone calls to federal agencies to notify them that federal funds are not available per the TSA. Document efforts made to request federal funds per the TSA.

When federal funds are not available per the TSA, maintain documentation of the amount of state funds expended, the dates of these expenditures, the date federal funds were requested and the date federal funds were received. Maintain this documentation for use in calculating federal interest liability on late federal funds. Note: In most cases, the State cannot calculate a federal interest liability unless the State has made a request through a federal draw system and had it rejected or has notified the applicable federal agency that federal funds are not available per the TSA. Calculate the state and federal interest liabilities by program. Notify DFA-OA of proposed changes to the funding techniques and clearance patterns. A state agency shall not make a change until it is reviewed and approved by DFA-OA and FMS. . Certify to DFA-OA-Reconciliation Section that CMIA programs conform to the drawdown methods described in the TSA. DFA-OA-Reconciliation Section requests this certification in December of each year.

How to Calculate Interest Due from or Due to the Federal Government

In cases where interest is owed to the federal government or due from the federal government under the TSA, agencies should calculate and document interest owed (interest payable) or due. The interest rate to be used is the annualized rate equal to the average equivalent yield of 13-week Treasury Bills auctioned during the state’s fiscal year. The interest rate is provided to the State by FMS. Agencies may contact DFA-OA to obtain the necessary annualized rates. Agencies should be aware that interest calculations could be audited.

State agencies receiving federal funds not designated as CMIA programs are subject to Subpart B of the CMIA. The principal responsibility of these state agencies is that they must minimize the time between the drawdown of Federal funds from the Federal government and their disbursement for Federal program purposes. Neither a state agency nor the Federal government will incur an interest liability on the transfer of funds for a Federal assistance program subject to this Subpart B.